IRD should not harass or bar defaulters from bona fide foreign trips

tax defaulters barred from leaving

The Prime Minister, Datuk Seri Abdullah Ahmad Badawi, in his capacity as Finance Minister should direct the Inland Revenue Board to stop invoking Income Tax Act Section 104 barring Malaysians from leaving the country for failing to pay income tax for business, tours and holidays when they have every intention of returning and not absconding from the country, and to seek the advice of the Attorney-General.

In her interview with New Sunday Times, the Chief Executive Officer and Director-General of Inland Revenue Board, Hasmah Abdullah advised 39,867 people who had been blacklisted as tax defaulters that they are barred from leaving the country for failing to pay income tax.

Holiday-makers who bought tickets at the recent Matta fair to go overseas are advised to visit the Inland Revenue Board before they board the plane.

This is most ludicrous and smacks of harassment and even blackmail — something which should not be associated with the public service.

Hasmah pointed out that under Section 104 of Income Tax 1967 (see below), individuals — locals or foreigners — would not be allowed to leave the country if they had not settled their income tax.

I believe that when Parliament passed Section 104 of Income Tax Act 1967 forty years ago, the intention was to prevent individuals, whether locals or foreigners, from evading income tax by absconding from the country — rather than to restrict their business or spoil their holidays plan.

I do not believe Parliament ever intended to prevent Malaysians with income tax problems from going to Singapore, Thailand or other overseas country whether for holidays or business.

I would therefore contend that Section 104 should only used to bar an income tax defaulter from leaving the country if he is likely to abscond to another country to evade payment — and not to be used all and sundry against everyone of the 39,863 defaulters who want to go overseas for holidays, tours or business with every intention of returning.

The Attorney-General should be asked to advise the Cabinet whether Section 104 should be given such a restricted meaning by the Income Tax Board, as 40 years after the enactment of the Income Tax Act in 1967, overseas travel have become commonplace especially in the era of globalization and the advent of budget airlines that there should be no unnecessary restrictions for freedom of travel, except in the specific case where the Income Tax Board have reason to believe that a defaulter is likely to abscond abroad to evade tax payment.

Income Tax Act 1967

Section 104. Recovery from persons leaving Malaysia.

(1) The Director General, where he is of the opinion that any person is about or likely to leave Malaysia without paying–

(a) all tax payable by him (whether or not due or due and payable);

(b) all sums payable by him under subsection 103(3), (4), (5), (6), (7) or (8); and

(c) all debts payable by him under subsection 107A(2) or 109(2) or 109B(2),

may issue to any Commissioner of Police or Director of Immigration a certificate containing particulars of the tax, sums and debts so payable with a request for that person to be prevented from leaving Malaysia unless and until he pays all the tax, sums and debts so payable or furnishes security to the satisfaction of the Director General for their payment.

(2) Subject to any order issued or made under any written law relating to banishment or immigration, any Commissioner of Police or Director of Immigration who receives a request under subsection (1) in respect of any person shall take or cause to be taken all such measures (including the use of reasonable force and the seizure, removal or retention of any certificate of identity and any passport, exit permit or other travel document relating to that person) as may be necessary to give effect to it.

(3) The Director General shall cause notice of the issue of a certificate under subsection (1) to be served personally or by registered post on the person to whom the certificate relates:

Provided that the non-receipt of the notice by that person shall not invalidate anything done under this section.

(4) Where a person in respect of whom a certificate has been issued under subsection (1)–

(a) produces a written statement signed on or after the date of the certificate by the Director General or an authorized officer to the effect that all the tax, sums and debts specified in the certificate have been paid or that security has been furnished for their payment; or

(b) pays all the tax, sums and debts specified in the certificate to the officer in charge of a police station or to an immigration officer,

the statement or the payment, as the case may be, shall be sufficient authority for allowing that person to leave Malaysia.

(5) No legal proceedings shall be instituted or maintained against the Government, a State Government, a police officer or any other public officer in respect of anything lawfully done under this section or subsection 115(2).

(6) In this section–

“Commissioner of Police” includes a Chief Police Officer;

“Director of Immigration” means the Director of Immigration in Sabah, Sarawak or West Malaysia;

“immigration officer” means a public officer having official duties in connection with the control of immigration into Malaysia or any part of Malaysia.

  1. #1 by Tai Lo Chin on Sunday, 25 March 2007 - 5:53 pm

    I totally agree with what Kit Siang said about “this is most ludicrous and smacks of harassment and even blackmail – something which should not be associated with the public service”.

    It is intended to embarrass as well. Our postal service is not efficient. There is no prior warning about certain installment of arrears due but not yet paid being served on the defaulter. He pays for the entire holiday package. He goes with his friend’ families. Suddenly he is stopped at the immigration in KLIA. It is embarrassing. People think he is a criminal. All the plans spoilt. Substantial part of what is paid to tour operator is forfeited.

    IRB’s CEO Hasmah Abdullah said “We’re always prepared to help taxpayers with genuine problems. As long as they’re willing to pay up, we’ll be flexible”. If you mean what you say then you should not spoil defaulters’ holiday plans especially when they do not have notice of this Section 104 of Income Tax Act 1967.

    Immigration should let them off after passing on the IRB’s warning that when they come back from holidays they should contact IRB to resolve the matter, there being no second chance given. At least this will lessen the problem of those who are barred and not served the warning of section 104’s enforcement.

    There’s however a wider issue.

    One can of course say you should not default in the first place. You should be a responsible citizen. Why entertain defaulters?
    Sometimes one can’t predict turn of business events, times can get rough and there’s no money to settle immediately entire outstanding.

    The better way is to engender the cooperation of the public. They must feel the responsibility not to evade payment.

    Right now many are aggrieved with the heavy direct and indirect taxes they have to pay, and they get very little back from the government.

    People feel that the government use the tax moneys and fritter them on useless grandiloquent projects which benefit not the Rakyat but the beneficiaries and cronies awarded without open tender, without merits, without transparency and accountability, with the contract sum jacked up and so on.

    Govt is so rich, people except for few are not, Petronas makes so much money but we know nothing of how its money is used. Not even helping to subsidise the fuel. What about indirect taxes? We are taxed like hell when we buy cars other than Proton. We are taxed at the toll that some cronies and UMNO related company reap continuously. We are taxed by service tax 5% when we eat at restaurants and use professional services of establishment more than RM300,000 turnover. We are taxed for sins like smoking and drinking. We are taxed when we pay stamp duty ad valorem 0.5% based on value of transaction incidental to all legal documentation.

    What do we get back? Some of children score straight As but offered neither scholarship nor a place of choice in local public universities.

    When we get blood clot in our brain like Yusnita Abas in the last blog thread we die because Seberang Jaya Hospital hasn’t got well maintained ambulence, and when we turn to Kepala Batas Hospital, there’s no money for petrol in their ambulances. Apa lah ini?

    We the rakyat definitely feel insecure financially when there is no fiscal and financial discipline shown by government on how to use fairly the tax moneys. Surely some of us would amortise payment obligation to IRB to protect and shield us from life’s vicissitudes that the government offers no buffer but aggravate.

    Our money in the EPF is supposed to be some kind of buffer but has gone to shore up some counters in Bursa Malaysia to promote ‘feel good’ to garner support for coming election or if not bail out some bank by putting good money to chase after bad.

    IRB, if you cannot prevent hardship on the people at least don’t exacerbate him by using arm twisting tactics like Section 104 on us without warning. Engender goodwill and foster cooperation on win win basis instead of making people feel you’re the enemy.

  2. #2 by teetwoh on Sunday, 25 March 2007 - 6:05 pm

    Immigration is too willing to be used by ANY government agencies. I was a victim of a directive, not from the IRD, but from some other agencies which have absolutely no jurisdiction, but does the Immigration care? They stopped me anyway, and what do I do – mount a legal challenge? In Malaysia? I left the country after a few years.

  3. #3 by Tai Lo Chin on Sunday, 25 March 2007 - 6:40 pm

    During Mahathir’s time, he gave chance but under present admin, which thinks Mahathir had signed too much on malaysia’s credit card, collection is all out, using all state agencies to collect, enforce and arm twist. Section 104 is enforced enlisting Immigration’s help because IRD officers get % from what is collected; police go all to collect fines in arrears using RTD to stop renewal of licences unless fines paid; all kinds of teams are sent out to the streets to collect data door to door on citizens and store them in software for future monitoring and enforcement. Information from MyKad also used. Authorities and agencies like TNB and Tenaga are like bloodhound chasing after moneys (as if country already bankrupt and not enough for mega projects). The only thing efficient about this country is collection of debt due to the government from the people. Nothing else.

  4. #4 by Cinapek on Sunday, 25 March 2007 - 7:06 pm

    Dealing with the IRB is “head I win, tail you lose” situation.

    Especially under the present self assessment system. You receive an absurd statement from IRD claiming that you owe them some large sum far different from the sum you have assessed and paid. When you make the effort to go and see them to resolve the matter, all they will tell you is to pay up first and resolve later. Which means if they made a mistake and you overpaid you can wait years or, maybe foreover, to get your refund. And if you try to argue the point they should actually prove that you owe that much before you pay, they will just issue the threat of the Immigration preventing you leaving if you do not pay up. It is a no win situation.

  5. #5 by negarawan on Sunday, 25 March 2007 - 7:16 pm

    IRD committed an “automatic” refund system 6 years ago. Nothing happened, and they still owe me money. Can we stop this Hasmah Abdullah from leaving Malaysia until I get all my money back?

  6. #6 by undergrad2 on Sunday, 25 March 2007 - 8:07 pm

    “In her interview with New Sunday Times, the Chief Executive Officer and Director-General of Inland Revenue Board, Hasmah Abdullah advised 39,867 people who had been blacklisted as tax defaulters that they are barred from leaving the country for failing to pay income tax.”

    Apart from the difficult issues like constitutional issues relating to freedom of assembly movement and association, which are good defenses for those involved to discuss with their lawyers, why does the IRB choose a difficult manner to recover unpaid taxes? Unpaid taxes could easily be solved by garnishments of salaries.

    It is common knowledge that adjudicated bankrupts, and among them prominent businessmen and women and politicians, traveling business class frequently to destinations like Australia and the U.K. I am quiet sure that none of them is among the 39,867 people black listed.

    Another case of selective prosecution which has come to characterize this administration and the Mahathir administration.

  7. #7 by undergrad2 on Sunday, 25 March 2007 - 8:10 pm

    Malaysia should be looking towards the merits of paying as you earn and have taxes withheld and deducted at source.

  8. #8 by lupus on Sunday, 25 March 2007 - 8:19 pm

    How many of you in this blog have overpaid taxes and are still waiting for a refund ? I am still waiting for it after 6 years. I retired 2 years ago and found that IRB owns me money and it was not a small sum as they had overtax me quite a bit. The question is should the IRB who is very good a collecting but really bad at refunding, should be force to pay a fair interest on the money withheld for more than 6 months ? A good rate would be 8% per year. I would not mind for the IRB to then hold my money for a few years.

  9. #9 by Jeffrey on Sunday, 25 March 2007 - 8:27 pm

    Undergrad2, Malaysia is First World when it comes to collecting money. We do have a system to effect monthly deduction of employees’ salaries. The system is called Schedular Tax Deduction (STD) system effective from 1 January 1995. Under it, employers are required to make deductions from their employees remuneration every month in accordance with a Schedule as prescribed by the Income Tax (Deduction from Remuneration) Rules 1994 [“The Rules”]. Every employer shall pay to the Director General, not later than the 10th. day of every calendar month, the total amount of tax deducted or that should have been deducted by him from remuneration of employees during the preceding calendar month.
    Such payments must be remitted together with Form CP 39 or a return setting out the names, identity card numbers or if none, passport numbers, and tax reference numbers of those employees from whose remuneration he has or should have made deductions.
    Section 104 of Income Tax 1967 is more likely enforced with the assistance of immigration officials against businessmen and corporations who or whose directors have not paid back dated taxes or in arrears.

  10. #10 by undergrad2 on Sunday, 25 March 2007 - 9:29 pm

    Jeffrey:”We do have a system to effect monthly deduction of employees’ salaries.”

    Again and I hate to say this, the American experience may be relevant and our legislators may want to take time to deliberate on the issues – and perhaps introduce the relevant legislation.

    Over here our salaries are deducted at source to pay federal and state and local taxes. It appears on our W2 (pay slip) as “federal income tax withheld” and “state income tax”. Invariably, the sum withheld is more than the tax payable. This is refunded when we file our tax returns. February to April are times when many U.S. taxpayers look forward to because they receive hundreds if not thousands of dollars in terms of tax refund.

    The IRS (in Malaysia, it would be the Income Tax Department) is serious about going after tax defaulters. They resort to garnishments of salaries routinely when the tax payer fails to file or respond, or in more serious cases to the registration of liens over their properties and foreclosure should that be necessary.

    Why can’t we do the same instead of waiting to pounce on travelers as they board their planes?? This is ridiculous!

  11. #11 by sheriff singh on Sunday, 25 March 2007 - 11:03 pm

    Go after the big defaulters first.

    Like the many multinationals, conglomerates and Government Linked Companies that owe billions in unpaid tax, telephone, water, and electricity bills. Yet their senior executives including very senior and well known personalities get away scott free. Shouldn’t they not be the first to be brought to book?

  12. #12 by aawilliam on Sunday, 25 March 2007 - 11:16 pm

    HI kit,
    Visir my site,comments are welcome……taken at Ipoh ,41st anniversary

  13. #13 by aawilliam on Sunday, 25 March 2007 - 11:17 pm


  14. #14 by toyolbuster on Monday, 26 March 2007 - 12:10 am

    I got retrenched 3 years ago because the economy in Malaysia was getting worse and my employer went bust. I never asked for any government handout, and prior to my retrenchment, I was paying my income tax always in excess because of the PAYE system. The last 3 years I was struggling like hell and I had to send my family back to live with my in-laws in singapore. I have been doing some small time trading business since I got retrenched, and I had to travel to neighboring countries for my business because the market in Malaysia is just not enough. I never cheated on my declared income when I submitted my tax return form.Over the last 3 years, I have been paying off my debts and left me nothing to settle for my income tax.
    Now they have done the 104 on me, I can’t travel for my business, and how on earth am I going to settle my tax owing. I can’t even travel to visit my family. This is like a house arrest for me. Its not like I’m owing tens of thousands of ringgit. And to think about those multi-millionaires, politicians included, who have been accused of evading tax by the millions, and they are frequently travelling overseas with their mistresses shopping in Paris, London, New York. Well, Madam Hasmah, I don’t know how you can sleep at night.

  15. #15 by sheriff singh on Monday, 26 March 2007 - 12:13 am

    Is the right to a passport and to travel a right or a privilege? For some countries it is the former, while in others the latter.

    The need to bar taxpayers from travelling abroad clearly shows the weakness of the IRD in collecting taxes. It should find out where it fails. How can the government consider tasking it to collect study loans from errant borrowers?

    Also, didn’t they recently lose a case costing them and the government RM 3 million for wrongfully preventing a Brit from returning home for about 20 years?

    IRD, reinvent thyself.

  16. #16 by Count Dracula on Monday, 26 March 2007 - 12:23 am

    “Go after the big defaulters first.” sheriff singh

    Brilliant idea. No one has thought about that!

  17. #17 by raven77 on Monday, 26 March 2007 - 1:00 am

    Hasmah is just another incompetent civil servant, taking short cuts. It is time someone injuncted this lady until she is made accountable for money owed to tax payers. What is sauce for the goose must be sauce for the gander….

  18. #18 by Loh on Monday, 26 March 2007 - 11:45 am

    It could have been worse;they might have not allowed defaulters to return!

  19. #19 by DiaperHead on Monday, 26 March 2007 - 12:00 pm

    Interesting. Considering the fact that most defaulters are Chinese, it certainly is one way towards forced emigration.

  20. #20 by achia3 on Monday, 26 March 2007 - 12:28 pm

    Well! I was one of those who was embarassed by this situation. When passing immigration to board a plane to Singapore I was stopped as some company who filed bankruptcy against me. Mind you my father used my name for the business in which failed ultimately and I haev to pay for the consequence. I was not prewarned nor given any notice earlier so that I can be better prepared. The most embarassing moment was telling my boss what happened. The amount owing was something which I can manage over time but having to declare this to my boss, I could have been sacked and there goes my bread and butter.

    Nevertheless, I have paid all taxes dues, got the suit for bankruptcy lifted and now living in Australia where although I pay hefty tax, I know I will get a fair deal out of it. At least where I live, I don’t pay toll at all, not to mention we have safe bicycle path to cycle to work.

    This whole government system is no different from the Roman regime that ruled 2000 years ago. Well! At least we know that the Roman empire builds better road then than MRR II.

  21. #21 by sheriff singh on Monday, 26 March 2007 - 2:43 pm

    The creature of the night is getting nightmares, sorry “daymares”, and offers nothing but gas.

  22. #22 by DarkHorse on Monday, 26 March 2007 - 9:18 pm

    The turbaned and bearded jaga in my office died the other as a result of an infraction with someone who owes him money, had money stored in his stockings.

    Perhaps the IRD should take note of this and go after not just tax defaulters but also tax evaders.

  23. #23 by undergrad2 on Tuesday, 27 March 2007 - 4:24 am

    To: Tai Loh Chin who says “There’s however a wider issue.”

    There is no wider issue. If you disagree with the BN run government and its tax policies in particular, and its policies generally then the logical thing to do would be not to vote BN in the elections. But having exercised your power to vote and lost, you should then respect the BN run government which has been duly elected by the majority – and pay your taxes.

    Since defaulting in your obligations as a citizen and responsible tax payer, would be breaking the law you cannot then complain if you are made to face the consequences of your action. You cannot then tell IRD how to do their job.

    I disagree with the methods used by IRD in collecting back taxes – stopping defaulters from boarding planes etc. since there are serious constitutional issues involved like free speech, freedom of movement, assembly etc.

    The logical way to proceed with non-payment of income taxes is to serve garnishee orders on their employers – efficient, cheap and effective way to collect back taxes. Employers cannot ignore such court issued orders.

  24. #24 by shortie kiasu on Tuesday, 27 March 2007 - 8:52 pm

    “I would therefore contend that Section 104 should only used to bar an income tax defaulter from leaving the country if he is likely to abscond to another country to evade payment – and not to be used all and sundry against everyone of the 39,863 defaulters who want to go overseas for holidays, tours or business with every intention of returning.”

    I would beg to differ in this instance.

    How would IRD ensure that the defaulters would return?

    We do not know the basis IRD declare a tax payer as “defaulter”, presumably, many reminders/warnings over certain period of time and over certain number of years of tax assessment not being paid to IRD.

    If the defaulters have the means to travel overseas, then why they cannot settle the tax owed; all of us paid our taxes in good time; it is the duty of all citizens to pay taxes.

    So we do not see any issue here for arguing for tax defaulters who have the means to travel overseas but not the willingness to pay taxes on past incomes earned.

  25. #25 by undergrad2 on Tuesday, 27 March 2007 - 10:26 pm

    “If the defaulters have the means to travel overseas, then why they cannot settle the tax owed; all of us paid our taxes in good time; it is the duty of all citizens to pay taxes.” Kiasu

    Yes, also explain this:

    Adjudicated bankrupts flying first class overseas every few months to supervise his business there and to see his kids who are studying there at taxpayers’ expense. I know one who has been adjudicated a bankrupt, having to pay RM500.00 a month for loans amounting to some RM20 odd millions doing exactly just that.

  26. #26 by DiaperHead on Tuesday, 27 March 2007 - 11:59 pm

    Don’t forget. How about felons with arrest warrants? Why stop at tax defaulters?

    How about going further and confiscate their passports at the airports since holding one is a privilege and not a right?

  27. #27 by Godamn Singh on Thursday, 29 March 2007 - 10:32 pm

    Goddamn right you are.

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